from the who-can-you-trust-if-you-can't-trust-the-phone-company dept

On the heels of Obama's surprise support of Title II-based net neutrality rules last month, we noted that the broadband industry's anti-Title II talking points (primarily that it will kill network investment and sector innovation) not only were just plain wrong, they were getting more than a little stale. That's a problem for the industry given the increasingly bi-partisan support of real net neutrality rules and the groundswell of SOPA-esque activism in support of Title II. As such, the industry's vast think tank apparatus quickly got to work on new talking points to combat net neutrality rules that actually might do something.

The first product of this renewed effort is this study by the AT&T-funded Progressive Policy Institute. The study's central thesis is that if Title II net neutrality regulations are passed, the nation will be awash in $15 billion in various new Federal and State taxes and fees:

"We have calculated that the average annual increase in state and local fees levied on U.S. wireline and wireless broadband subscribers will be $67 and $72, respectively. And the annual increase in federal fees per household will be roughly $17. When you add it all up, reclassification could add a whopping $15 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program. The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification."

Like a well-oiled machine, the cable, phone and broadband industry got to work pushing its study across all the major news outlets over the last week. AT&T CEO Randall Stephenson quickly took to NBC (skip to 1:05) to claim the average household broadband bill would increase by $19 a month under Title II (note amusingly that he got the study numbers his own company helped pay for wrong). The cable industry also not-so-subtly took to using this graphic in ads proclaiming Title II will result in vicious price hikes for everyone:

You'll probably be surprised to learn that the broadband industry had to resort to conflation, data cherry picking and a parade of worst-case scenarios to get these numbers. On the state level, Internet access has long received a Congressional exemption that's set to expire December 11 -- an issue totally unrelated to the Title II push. Congress can make sure the exemption is extended, keeping state sales taxes far away from broadband access. If they don't, again, it has nothing to do with Title II. Realize this, and nearly all of the PPI's estimate of $15 billion in new taxes as a direct result of Title II goes up in smoke right out of the gate.

In an e-mail conversation about the study I had with Free Press Research Director Derek Turner, Turner argues that PPI is also predicting a very worst-case scenario on Federal taxation that's simply not going to happen:

"The FCC could decide to forbear from requiring federal USF contributions for one. And whether or not the FCC does that, adding broadband into the USF mix wouldn't impact the overall size of the fund. That is, if broadband revenues were assessed but the fund size stayed constant, consumers would pay on broadband but, as a result, they'd pay less on their other services like wireless and wired voice. PPI asserts that consumers would pay more on aggregate than they do now (i.e. by adding broadband to the mix, their numbers imply that the burden for the fund will shift towards consumers from businesses), but the report out today offers no explanation of why the contribution percentage would tilt that way."

Of course the pretense that the broadband industry cares about how much your bills increase is also laughable, given the industry spends a large part of each day trying to figure out creative ways to pad your bill. This includes rate hikes, usage caps and a wide variety of fees imposed below the line to jack up the advertised rate post sale. These fees range from entirely bogus, non-government mandated "regulatory recovery fees" (pure-profit fees imposed to offset ambiguous government regulation despite a decade of deregulation) to new "broadcast TV fees" that simply bury a portion of programming costs below the line. They're all a variety of false advertising, but they highlight how the biggest increases to below-the-line charges and fees are coming from the industry itself.

The reality the broadband industry doesn't want to acknowledge is that very little changes for it under Title II if carriers aren't engaged in bad behavior. The broadband industry is fighting Title II solely to protect potential revenues generated from abusing uncompetitive markets. That this self-serving behavior is being dressed up as concern about the size of your broadband bill is the industry's best comedic work to date. Perhaps this slightly edited (by Mike) version of the NCTA ad is a bit more accurate:

from the urls-we-dig-up dept

The healthcare industry in the US is crazy, and it's not a simple task to assign blame. Many patients aren't paying out of their own pockets because they rely on insurance, but then this arrangement doesn't provide any incentive for patients to try shopping around. On the other hand, even if patients wanted to shop around, it's nearly impossible to determine what the prices of any medical procedures are because they vary widely based on the hospital and what payment arrangements have been negotiated behind closed doors. If you've ever had medical treatment that required any kind of specialized testing or surgery, you've probably never fully understood the resulting bill (congratulations to you if you do understand all your medical bills). Here are just a couple examples of some not-so-uncommon experiences with the healthcare system.

from the urls-we-dig-up dept

Just about every denomination of US currency has been counterfeited at some point. But there are some really good copies out there (aka supernotes) that are extremely difficult to detect. In response, every few years, the government has to issue new bill designs that are harder and harder to duplicate. Here are just a few interesting links on detecting fake money and issuing new currency.

from the well,-a-lack-of-competition dept

Tech Jay points us to an interesting report by Matt Stoller arguing that, in the US, "corruption" is responsible for 80% of your mobile phone bill. Unfortunately, that's a bit of an exaggeration. However, it does raise some useful points about problems of US competition in the market. The key point Stoller uses is that we pay a hell of a lot more for mobile service in the US than elsewhere:

You see, according to the Organization for Economic Cooperation and Development, people in Sweden, the Netherlands, and Finland pay on average less than $130 a year for cell phone service. Americans pay $635.85 a year. That $500 a year difference, from most consumers with a cell phone, goes straight to AT&T and Verizon (and to a much lesser extent Sprint and T-Mobile). It’s the cost of corruption. It’s also, from the perspective of these companies, the return on their campaign contributions and lobbying expenditures. Every penny they spend in DC and in state capitols ensures that you pay high bills, to them.

There's an unfortunately big leap in logic there, in not exploring any other possible reason for the difference in bills. Some of it likely is due to lobbying, but not necessarily all of it. The real issue that seems to come out in the piece is the significant lack of competition in the market -- some of which is due to lobbying efforts and consolidation by the market, but not all of it.

The Stoller piece keys off of the regulatory fight over Lightsquared, arguing that it was blocked due to massive incumbent lobbying against this potential upstart competitor. That tells part of the story. It's absolutely true that the telcos did not want to see new entrant competition from the likes of Lightsquared, but it also completely ignores the fact that the technological issues around Lightsquared are real and the project was blocked not just because of incumbent lobbying, but because of significant problems in avoiding interference. To not even admit that is pretty bad.

However, as we did note in our discussion over Lightsquared, the real problem in the market is the lack of real competition in the space. For years and years, we've been arguing that the market needs more competition in this space to keep dominant players from charging monopoly rents, while decreasing their investment in innovation. In fact, Stoller does a nice job showing how investment as a percentage of revenue has clearly decreased as consolidation has shrunk the number of competitors:

So, we agree that the real problem here is competition, and there's little doubt that massive lobbying by AT&T and Verizon has been used to try to limit competitors, but that's not the only reason for the lack of competition in the space, and it's certainly not the sole reason for our mobile phone bills being higher in the US than in Scandanavia. There are certainly many other issues including coverage and population density, standards lock-in and other aspects. Certainly, though, there are things like spectrum reform, antitrust enforcement and related issues that are heavily lobbied.

Finally, it's a bit silly to argue that all lobbying is "corruption." As we've noted lobbying can often go in the other direction -- and plenty of "lobbying" is perfectly reasonable. One of the key complaints we have about politicians regulating the internet is that they're regulating something they don't understand. One way that they can and do actually learn about things they don't understand is through lobbyists. The problem is the imbalance in lobbying, where you have some lobbyists with excessive influence, and those who represent the public interest often having much less exposure (public interest lobbying groups, obviously, don't have as much money).

Lack of competition is a huge issue in the mobile world. The crony capitalism of companies getting regulations they want through lobbying is a huge issue. The fact that we pay more for weaker service is a real issue. But to lump all that together and claim that 80% of our mobile phone bills are due to corruption is a huge and exaggerated logical leap.

from the that'll-upset-some-folks dept

While not the first time it's done so, the GAO has once again urged the federal government to get rid of dollar bills and replace them with dollar coins. It says that this single move could save the government $5.5 billion over 30 years. That's chump change to the government, but it's still $5.5 billion. The report notes that Canada and the UK have done similar moves, and it has worked despite initial public resistance. Still, I'd imagine that US public resistance can be stronger than elsewhere on issues that are fundamentally meaningless, but to which people apply a sentimental value. And let's not even get started on the question of whether or not it's finally time to ditch the penny...

from the more-confusion? dept

It's been talked about for ages, but the FCC is finally preparing to take on mobile operator "bill shock," that happens when a user, unknowingly, goes way over their allotted time/data and is charged ridiculous overage fees, leading to the ever popular stories of multi-thousand dollar bills. The FCC plans to require mobile operators to at least alert users when they're nearing the limits on their plan. While I'm often skeptical of FCC actions, I'm having trouble seeing what's wrong with this, and the mobile operators protestations are so silly that it's difficult to take them seriously.

Mobile operator trade association CTIA has warned that these sorts of warnings would "cause customer confusion and frustration." Huh? How? And it's already established that it's the crazy huge bills that are causing customer confusion and frustration (and, um, anger). Then there's Verizon Wireless, quoted as saying that "intense competition has led wireless carriers to provide consumers with usage information." Hmm. Information like the phantom charges that Verizon Wireless denied for nearly two years, until it finally 'fessed up and agreed to pay back to the tune of $50 million to $90 million. Honestly, I can't figure out what the pushback is over actually warning customers before they get insane overage charges?

from the ripping-off-retirees-is-our-business-model dept

Last week we highlighted the highly-flammable combination of users who don't read their contract fine print or know what a gigabyte is -- and carriers that seem incapable of properly alerting customers before their 3G bill requires a second mortgage. This week the Boston Globe has yet another story of this kind -- exploring how a Dover, Massachusetts man has been fighting Verizon Wireless over an $18,000 phone bill since 2006. The man (obviously annoyed about the impact this has on his credit report) missed the fact that his two-year contract with Verizon expired, and his new contract began billing him by the kilobyte. His son, who had tethered his phone to his laptop, quickly racked up thousands of dollars in overage charges after downloading 1,119,000 kilobytes. Verizon, for their part, were not particularly helpful according to state regulators:

"Kevin Brannelly, an official at the state Department of Public Utilities, tried to help the St. Germain family fight the bill because it did not seem right. "Never in my 25 years here have I seen such stubborn and senseless resistance to what is obviously a mistake," he wrote in an e-mail to St. Germain."

As with all these stories, Verizon justifies this absolutely insane markup over cost on their data service by insisting they at least made their ridiculously-constrictive pricing clear to consumers. Apparently not, given we've been watching a steady parade of these stories for years now. What has been made clear is that the cap and overage billing model isn't working for many customers. It also continues to be clear that carriers are doing a miserable job educating their users, and an even worse job implementing effective systems that alert a user before their bill goes utterly apocalyptic. While carriers often do reduce these charges after they're exposed in the press (though in this case half-off is still obnoxious) -- you have to wonder how many of these over-billing stories aren't being told.

Some carriers appear to be realizing that the millions to be made from ripping off retirees and the kilobyte confused isn't worth the endless bad press, and that helping your customers understand their bills might just help you differentiate your services. T-Mobile for instance is moving away from this cap and overage model, and last week announced they'd simply start throttling users back to slower (usually around 128 kbps) speeds should they cross their monthly cap. It seems like wireless carriers can either continue to rip people off until regulators get involved (or customers flee to more user-friendly carriers) -- or they can provide users with the tools necessary to help them adequately understand and control their monthly bill -- before it requires loan shark intervention.

"The ugly truth is that upon investigating the issue, I found a number of things could have been done by Verizon to protect me as a consumer. They may not mention them outright, but they are there. The fact that these things were not done can only lead me to assume that Verizon would rather their consumers "understand" as little as possible about their TOS.'"

Except as a consumer, it's his responsibility to read the find print on his contract and understand the limitations and penalties of his plan. The user studied the charges, spoke with representatives -- even seemed to have at least a base understanding of what he was going to be charged per kilobyte -- and then chose to use expensive 3G data on an overseas trip anyway. Consumer responsibility and research plays a big part of the equation.

That said, we've been saying for a long time now that these bills demonstrate the fact that carriers aren't doing a particularly good job making service limits clear or educating customers. Many consumers (more than you would think) can't tell the difference between a kilobyte and a lemur, and Verizon's math skills on this front aren't always reliable to begin with. While most carriers have some kind of mechanism in place to help notify users of excessive usage, carriers haven't done a great job notifying users when their bill starts to go nuclear (like many credit card companies do when a large charge appears on your card) or making overages clear. Fortunately, carriers often agree to slash these bills -- but usually only after they receive media attention.

In the UK, where they've seen the same kind of insane 3G bills, regulators have jumped in and addressed the problem by first capping roaming charges -- but then by also requiring (as of July 1) that carriers allow users to set a monthly maximum cap that limits how much they can spend on data each month. Consumers get an automated alert as they approach 80% of that total, then their service is temporarily suspended when the user crosses the spending cap. If users don't choose a limit, a limit of $68 per month is set for them (that's only data and doesn't include voice minutes or other bill totals). Of course here in the States carriers aren't going to want to voluntarily employ tools that reduce how much money they can make off of confused users, and will fight any regulation that limits how much they can charge. So nothing changes, and story after story emerges about users whose phone bills resemble the GDP of small countries.